Modi government seems to be taking a lot of comfort from the low crude oil prices while banking on the domestic distribution reforms as it has projected a sequentially lower petroleum subsidy in the next two financial years. The government, in its Mid-Term Expenditure Framework tabled in Parliament on Thursday said that the petroleum subsidy bill will be at Rs 18,000 crore in the next financial year 2018-19, and will further fall to Rs 10,000 crore in the following year 2019-20. The figures compare with the Rs 25,000 crore that the government has budgeted for petroleum subsidies in the current financial year 2017-18.

Globally, crude oil prices are under pressure, although those have recovered to some extent from the lows seen early this year. Today, Brent crude, the global benchmark, was up 18 cents, or 0.3%, at $52.88, after falling slightly earlier. It closed up 1.1% on Wednesday, snapping two days of declines. US West Texas Intermediate (WTI) crude was up 16 cents, or 0.3%, at $49.72, after declining earlier. The contract gained 0.8% in the previous session.

Back home, the government has over the past several years gradually deregulated petrol and diesel prices, freeing the state exchequer of a huge subsidy burden. It is also increasing the prices of LPG (domestic cooking gas) in pockets, and is taking steps to check leakages in distribution by transferring subsidies directly to the eligible households, again leading to huge savings for the exchequer. Read More…